The U.S. Postal Service gave an unfair advantage to competitors like Netflix and Blockbuster Video, a regulatory board said Wednesday, awarding game rental service GameFly a victory in a two-year dispute over the postage, breakage and sorting of its disc mailings.

The Postal Regulatory Commission found that the USPS gave "an unreasonable preference" to Netflix's mail, and ordered that the Postal Service create two rate categories for the DVD mailings used by Netflix, GameFly and other rent-by-mail businesses. The categories will end the surcharges GameFly incurred for hand-sorting or for excess weight in its mailings, thicker and heavier for auto-sorting because of the cardboard protection sleeve around the disc.

GameFly had complained that its competitors had received hand-sorting, as opposed to auto-sorting, at no extra charge, significantly reducing its rate of disc breakage. The same benefit was not accorded GameFly, which said NetFlix's savings on the preferred rate amounted to its monthly profit.

GameFly has been at it with the U.S. Postal Service for nearly two years now over what it perceives …
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A PRC commissioner, Tony L. Hammond, agreed with the finding but noted he did not want it to discourage the Postal Service from finding ways to support its customers and grow their businesses. "Netflix explained to the Postal Service what treatment would be most helpful to it. There is nothing wrong with that. In fact, the Postal Service should encourage this type of communication," he wrote. "I hope this decision does not discourage the Postal Service from helping businesses to use the mail."

This ends the premium GameFly had to pay in the handling of its mail. How that benefit will be passed on to consumers remains to be seen.